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Ethical Capital: The Neglected Aspect in the Conceptualisation of Social Enterprise Mike Bull, Manchester Metropolitan University Rory Ridley-Duff, Sheffield Hallam University Doug Foster, University of Surrey Pam Seanor, University of Huddersfield Social Enterprise Research Conference – 26 th – 27 th June 2008

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Objectives of the paper o This paper is very much a tentative piece of theorising that brings together our (different) views around the conceptualisation of social enterprise to initiate and stimulate further research o What we are trying to do here is explore the conceptualisation of social enterprise from a new perspective, a new frame of reference o How do we frame the way we look at social enterprise? - what lenses do we currently look through and what might an alternative lens look like? o We introduce the conceptualisation of ethical capital as the neglected aspect in the conceptualisation of social enterprise, in looking through this lens we think we have a story worth telling!

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Context o What is different about Social Enterprise from the Private Sector? o What is blurring at the boundaries in the mix between non-profit and profit? o What is distinctive? Where does CSR and social enterprise differ?

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Context o What is different about Social Enterprise from the Private Sector? o What is blurring at the boundaries in the mix between non-profit and profit? o What is distinctive? Where does CSR and social enterprise differ? o What current conceptualisations are there of Social Enterprise? o Primarily Social? o Entrepreneurial income generation – ‘Trading’? o Building Social Capital?

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Context o What is different about Social Enterprise from the Private Sector? o What is blurring at the boundaries in the mix between non-profit and profit? o What is distinctive? Where does CSR and social enterprise differ? o What current conceptualisations are there of Social Enterprise? o Primarily Social? o Entrepreneurial income generation – ‘Trading’? o Building Social Capital? o Are the current conceptualisations comprehensive? o Have we all the ingredients? o Is ethical capital one ingredient that is missing?

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Context - Ethical Capital ? o Tim Smit (Eden Project) – Voice 07 One of the most interesting things I have come across recently is that a lot of people in the city reckon that corporate life as we know it is going to be dead in thirty years. And I would say that Eden would be a good example of why. When I look at my top executives, the top eight people who work for me are all people who have decamped from very successful jobs in very successful organisations, because they no longer want to work for corporations where there is no ethical capital, and this is happening all over the place. Nowadays 40% of school leavers apparently do not want to work for a corporation. [emphasis added]

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Conceptualising Ethical Capital o ‘There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception and fraud.’ (Friedman, 1970) This prescription for the way to behave has left society with a low ethical base

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Conceptualising Ethical Capital o“It is contended that modern business theory, as represented by the Neo Classical economic paradigm, has established a moral code of business based on efficiency of outcome and the assumed link of efficiency to self- interested behaviour. The result is markets as the arbitrators of ethical outcomes, and profit maximization as the ultimate moral code” (Keller 2007) 2 points to consider here; (1)A world dominated by self-interested behaviour (2)A world dominated by a market ‘system’

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o “the market frees individual acquisitiveness from moral, social and/or religious constraints. While this acquisitiveness can be a source of great energy and creativity, it is also a turbulent, disruptive, and potentially disintegrative force. Moreover, the market is believed to contain an expansionary dynamic, so that unless it is contained it progressively invades and colonizes other spheres of our social lives; oIt releases self-interest from moral restraints oIt erodes all social ties other than purely economic ones and/or converts social relationships into instrumental ones ("commodifies" them) oIt promotes a preoccupation with narrow individual advantage at the expense of responsibility to the community or social obligations oIt substitutes competition for voluntary cooperation oIt favours materialistic or hedonistic values.” (Maitland 1997)

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Conceptualising Ethical Capital o There is hope! – Social Enterprise? o How do we bring this discussion and theory from the literature into the social enterprise debate? o Where are the boundaries and where can we draw differences from the behaviour of business to the behaviour of social enterprise? o What perspectives can we offer?

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Conclusions o The objective of the paper was to present the neglected aspect in the conceptualisation of social enterprise. o A new frame of reference in ethical capital may add to the list of characteristics that help define this organisational form o The business world is changing – the rules of the game are shifting – CSR and social enterprise reflect the changing times in which we live – the primary purpose of each organisational form may not simply be ‘for profit’ or ‘for social’ – ethical capital may add insight.

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Discussion? o We have presented a new perspective in the conceptualisation of social enterprise o Is this the changing appetite to stimulate peoples’ taste buds for a more ethical code of conduct? o Are there benefits to social enterprises that this conceptualisation may allude to? o This paper has bridged from practice into theory – can it go back again? o Can ethical capital be capitalised on in social enterprises? o And... How can we analyse or measure ethical capital?